Around $2tn of illicit cash flows annually through the global financial systems despite efforts from regulators and financial institutions. One method to combat dirty money is with enhanced due diligence (EDD) that is a comprehensive know your customer (KYC) process which focuses on a paradigm shift in data security: the rise of VDRs customers and transactions with greater fraud risks.

EDD is generally thought to be a higher level of screening than CDD, and may involve more information requests, like sources of wealth and funds corporate appointments, associations with other individuals or companies. It also often involves more extensive background checks, which may include media searches to discover any publically accessible or publically known evidence of misconduct or criminal activity that could be an enigma to the bank’s business.

The regulatory bodies have rules on when EDD should be triggered. This is usually based on the type of transaction or customer, as well as whether the person concerned is politically exposed (PEP). It is up to each FI to decide if they want to add EDD to CDD.

It is crucial to establish policies that clearly communicate to employees what EDD expects and what it doesn’t. This will help avoid high-risk scenarios that could lead to hefty fines for fraud. It’s also crucial to have a thorough process for identity verification that enables you to detect suspicious IP addresses, spoofing technologies and fictitious identities.